Scrushy Was CEO of $2.87 Billion Fraud at Healthsouth Says Judge Horn

June 19, 2009

Pursuant to a court order, former Healthsouth founder, Richard Scrushy (who is currently serving a prison-term for an unrelated federal public corruption conviction), was found liable yesterday after an 11-day bench trial for the faked profits and assets scheme that almost destroyed what was at one time the largest healthcare company in the world. “Scrushy was the CEO of the fraud,” wrote Jefferson County, Alabama Judge Allwin Horn in an opinion issued yesterday (emphasis in the original). “Scrushy knew of the Fraud, approved it, and participated with [others] to perpetuate it from the Fraud’s inception in mid 1996 until its public disclosure in March 2003,” said the Judge. According to Russell Hubbard of the Birmingham News,

Horn also agreed with shareholders that Scrushy engaged in insider stock trading, shuttled Healthsouth spending to companies he had an interest in, and collected improper bonuses that were triggered only by the fraud he led.

The eleven-day trial had its bizzare moments, including testimony from Scrushy attempting to explain why he used Healthsouth funds to pay for his wife’s lingerie business “Upseedaisees” and for breast implants for a pop girl band Scrushy once promoted on the company dime. But Judge Horn’s Order turns the table — after years of wasting shareholder’s money to fund his excesses, Scrushy now has to exhaust his own assets until the $2.87 billion is repaid. In addition to the Final Judgement Order, Judge Horn issued a 47-page written opinion detailing how Scrushy masterminded the fraud — the lead sentence of the memorandum opinion reads like the closing lines of a morality play: “The last chapter in the HealthSouth/Scrushy saga… is coming to closure,” wrote Judge Horn. Of course, there’s always the inevitable appeal, and then the problem of collecting the judgement. We’ll keep you posted on how that goes, because — as they say — “it ain’t over until the fat lady sings.” Read the Court’s full opinion, here.

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